Occasionally, I get questions from folks about how to set up a budget and what is the best way to manage their finances for their situation. I will say that I do not confuse managing your finances with investing your money. Investing is just a subcategory of financial/money management. The same goes for running a budget. Managing your finances breaks down into a handful of subcategories, each with their own specific skill sets, but here are the three principles I will focus on:· Budgeting· Planning· Investing

Another notable financial management skill includes a knowledgeable use of legal entities and applicable understanding of tax law.

Budgeting I have found that the most effective way to build and manage a budget for the long term is to automate as much of it as you can. Now, I’m not saying to put all your bills on auto-pay and throw cash at every Tom, Dick, and Harry before you pay yourself. Introducing the sub-skills of budgeting:1. Appropriating The first step to automating the budget is to gain discipline in appropriating your money. Everyone’s situation may be different in terms of the financial thinking cap, but the same rules can be applied across the board. In “THE ANCIENT BABYLONIAN RULES OF MONEY VIA 21ST CENTURY LANGUAGE” I share the seven ancient Babylonian rules of money that are still relevant today. Rule number one, which is to pay yourself first, and rule number two, which is to “stay in your lane” as I had put it in the article, applies directly as a guide to automatically appropriating your money. Rule number one is to set aside at least ten percent of any monies you earn before you appropriate any more funds. This money does not exist anymore as far as you are concerned, at this time. This skill is expanded upon in the investing category, with the “asset allocation” skill. Next is rule number two, “stay in your lane”, which is to take the remaining ninety percent and appropriate that towards your lifestyle expenditures. If you have bad debt liabilities however, then you appropriate no more than twenty percent of that remaining ninety percent towards paying off your bad debts.2. Saving This brings me to saving, and saving money is not one’s ability to save pennies on the dollar for the sake of saving. That would be considered money worship, because you are forcing yourself to live below your means. People with this money worshiping behavior have a seemingly uncontrolled value for more money in their possession, at their own expense, but for no definitive purpose. I have talked about this money worship a few times, but first noted the behavior, in “GOT YOUR MIND ON YOUR MONEY OR YOUR MONEY ON YOUR MIND,” with an example of masochist money savers. The budgeting ability to save is to be skilled in cash flow management. The point of saving isn’t to labor about, trying to retain as much currency as possible at the expense of your lifestyle. No, the point of saving is to properly manage the cash flow within the budget for the purpose of retaining resources (or acquiring more resources) that will improve the quality of your lifestyle. The concept of a dollar saved is equivalent to a dollar earned is brought up in “INCOME STREAM VS CASH FLOW”. Much of your saving skill will be a byproduct result of the developed discipline you have built from the ability to appropriate your money. In other words if you know you only have “X” amount of dollars appropriated to funding your lifestyle, then naturally you will begin to find the most economically efficient way to manage the cash flow, so that you get the most out of your specific lifestyle. The next installment will explain how to evolve your lifestyle by utilizing the “planning” subcategory ability to financial management.

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